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Capital Market Expectations
Capital Market Expectations
Medium
An analyst constructs a 90% confidence interval for next year's S&P 500 return as 4% to 12%. Over the past 10 years, the actual return has fallen outside her 90% confidence intervals in 6 out of 10 years. This pattern most likely indicates:
A
Overconfidence bias — the analyst's confidence intervals are too narrow
B
Anchoring bias — the analyst is anchored to the long-term average return
C
Recency bias — the analyst overweights recent positive returns
D
Model uncertainty — the chosen model is fundamentally flawed
Select an answer to continue
Tags
#overconfidence
#confidence-intervals
#behavioral-biases
#forecasting-challenges
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